Sunday, May 03, 2009

Free Markets (23) - Unequal Outcomes

The exchange of goods and services in a free market will often produce unequal outcomes. People will generally reject transactions that make them worse off, but a few will make mistakes that push them into poverty.

Some mistakes will be made when na├»ve or innocent people are “ripped off” by bad people (they should be forced to make restitution), but most poverty is not the result of evil actions, but flows from the vagaries of life. Trade in free markets can push people into poverty without any immoral action being taken.

  • A bad decision in a free market can produce a huge loss.
  • An unwise offer will sometimes be accepted.
  • A desperate seller may be forced to accept a very low price.
  • Some people are foolish buyers.
  • Others are foolish sellers.
  • Some people are not as clever as others.
  • People with rare skills can achieve higher pay than others.
  • People who do not use their skills and capital may find themselves in poverty.
    Lazy hands make a man poor (Prov 10:4).
  • The sick and handicapped will struggle to prosper by buying and selling.
  • Producing goods that no-one wants will leads to losses.
  • People with surplus goods can improve their situation.
  • Market only benefits those who participate.
  • People in desperate circumstances may have not surplus to sell.
  • People with nothing to sell gain nothing from free markets.
  • Many are harmed when the people they depend make mistakes.
  • Employees are harmed by the mistakes of their employers.
  • Economic power is really the power to harm other people.
  • People caught up in a war can lose everything they produced.
  • Droughts, tornadoes and floods push innocent people into poverty.
Markets provide opportunities, but some people will be unable to take them up. Some people will benefit more than others. Transactions in a free market can produce inequality, even when every participant is honest and good.


Gene Redlin said...

Employees are harmed by the mistakes of their employers.

This goes both ways.

Blessed Economist said...

You are quite correct. The only difference is that employers have a bit more control, so should be able to limit the scope of their employees mistakes.